2. DEFINITION
The income from Houses, Building, Bungalows, Godowns etc. is to be computed and assessed to tax under the head
“INCOME FROM HOUSE PROPERTY”. The income under this head is not based upon the actual income from the Property
but upon Notional income or the annual value of the Building.
Conditions that has to be satisfied to be taxable under this head :
1)The property should consists of any building or lands appurtenant thereto.
2)The assesse should be owner of the property.
3)The Property should not be used by the owner for the purpose of any business or profession carried on by him,
the profits of which are chargeable to Income Tax.
4. Actual rent
received =
rent received
– loss due to
vacancy –
unrealized
rent
Annual value: capacity of the property to earn income.
Municipal value: derived by municipal authorities.
Fair Rental Value: calculated by comparing similar property
having similar features.
Standard Rent: Amount prescribed by RENT CONTROL ACT.
Actual Rent received: Amount received by the owner from the
tenant.
Important terms to know:
5. Particulars Amount (in Rs)
Gross Annual Value (GAV) XXXX
Less : municipal tax (XX)
Net Annual Value (NAV) XXXX
Less : Deductions u/s 24
Standard Deductions (30%) (XX)
Interest on borrowed capital (XX)
Income from House Property (A) XXXX
Add : Unrealized Rent Received (B) XX
Add : Arrears of Rent Received (C) XX
Less : 30% of Arrears of Rent (X)
Total Income from House Property
(A+B+C)
XXX
Computation of House Property
6. F)
ACTUAL RENT
RECEIVED
D) STANDARD
RENT
A) MUNICIPAL
VALUE
B) FAIR RENTAL
VALUE
C) HIGHER OF A
AND B
E) LOWER OF C
AND D
G) HIGHER OF E AND F
i.e. GAV
How to Calculate GAV??
8. Table showing calculation of Net Annual Value of properties:
Let out property Deemed to be let out
property
Self occupied property
NAV = Rent paid –
Municipal taxes paid
NAV = Reasonable rent of
a similar place – Municipal
taxes paid
NAV = NIL
STANDARD DEDUCTIONS
A tax deduction of 30% of Net Annual Value of the property is allowed to the taxpayer. Net Annual Value is
calculated as Gross Annual Value minus Municipal Taxes Paid. This deduction is allowed irrespective of the amount
spent on insurance, repairs, water and electricity supply, etc.
9. TAX DEDUCTIONS FOR HOUSE LOAN
Deduction
is allowed
on (accrual
basis) :
Constructio
n
Purchase
Reconstructio
nRenewal
Repair
Limitations
Let out Property Self occupied Property
No Limitations
After 1st April
1999
Before 1st April
1999
Rs 2 lakhs (in case
of purchase or
construction)
Rs 30 thousand
(irrespective
whether the loan
is taken for
purchase,
construction,
repair, renewal or
reconstruction)
Rs 30 thousand
(in case of repair,
renewal, or
reconstruction)
10. PRE CONSTRUCTION INTEREST
Loan for purchase
or construction Deduction Allowed
Loan for Repairs or
reconstruction
Not AllowedDeduction
5 Equal
installments
(from the year in
which the house
is purchased or
construction is
completed).
Threshold limit
Rs 2 lakhs in a year only
in case of house property
An individual has taken loan on 01.06.2010 and completed the construction on 01.06.2012. The interest for the period
commencing from 01.06.2010 to 31.03.2012 shall be treated as Pre-construction period interest.
11. TAX BENEFIT ON HOME LOAN PRINCIPAL REPAYMENT UNDER SECTION 80C
Deduction is available on
payment basis
Maximum deduction Rs 1,50,000
Deduction is available on
stamp duty and registration
fee
Who can claim ?
Assesse who has
taken loan or not
When can an assesse claim ?
In the year when these expenses are
incurred.
To claim this deduction avoid selling the property in 5 years otherwise you will not be eligible to claim any deductions for
the principal repaid during the FY and the total amount of tax deduction already claimed in respect of earlier years shall
be deemed to be your income of such year in which you sold the property and you will be liable to pay tax on that
income.
12. Conditions for claiming Deductions
You can claim deduction only if the construction of
property is complete and you have received a completion
certificate for the same.
No deduction would be allowed under this section for
repayment of principal for those years during which the
property was under construction.
Deduction is also available whether the property is
self-occupied or let out & the benefit can also be claimed for more than 1 house property.
13. IF THE INCOME
FROM HP IS
NEGATIVE (LOSS) YOU
CAN SET OFF THAT
LOSS AGAINST OTHER
TAXABLE HEAD OF
INCOME
THEN ADD TOTAL
INCOME FROM HP
WITH TOTAL INCOME
FROM OTHER HEADS
TO GET GROSS
TAXABLE INCOME
ADD ALL INCOME
EARNED FROM HOUSE
PROPERTY OWED BY
YOU
ACCORDING TO RECENT BUDGET 2017 ONLY Rs 2 LAKHS CAN BE ADJUSTED AGAINST
INCOME FROM OTHER HEADS IN A FINANCIAL YEAR AND CAN BE CARRIED FORWARD
FOR 8 ASSESSMENT YEARS
SET OFF AND CARRY FORWARD
14. Example: Mr. x has let out one house property @ Rs 62000 p.m. Municipal Value is Rs 72000 p.m.; Fair rent Rs 90,000 p.m.
Standard rent Rs 100000 p.m. Municipal tax paid during the year is Rs 40000.
Compute income from house property.
Particulars Amount (rs)
Fair rent (90000*12) 1080000
Municipal Value (72000*12) 864000
Reasonable letting out value
(RLV1)
1080000
Standard rent (100000*12) 1200000
Reasonable letting out value
(RLV2)
1080000
Actual rent received
(62000*12)
744000
GAV 1080000
Particulars Amount (rs)
GAV 1080000
Less Municipal tax 40000
Net Annual Value 1040000
Less Deductions u/s 24
Standard Deductions
(30%)
312000
Interest on loan NIL
Income from House
property
728000
Calculation of GAV Computation of Income from House Property
